Presentation of the TCTA Strategy for 2012 to 2013pmg-assets.s3-website-eu-west-1.amazonaws.com/docs/...The Medium Term Expenditure Framework has confirmed an amount of R2.3bn for

transform empower lift

5/10/12

Presentation of the TCTA Strategy for 2012 to 2013

11

Date: 8 May 2012Time: 09:30


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Agenda

�Overview

�Directives

�Expanded roles

�Budgets 2012/13

�Financial Highlights


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Overview

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Purpose of TCTA

�TCTA is a Special Purpose Vehicle, established by DWA to raise off-budget funding for projects.

�The purpose of constructing works off-budget is two-fold:

� To ensure that the cost of the infrastructure is paid for by the benefiting end user and not by the entire tax base;

� To reduce the Government borrowing requirements


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Vision & Mission

�Vision: To be a leader in sustainable supply of water in the region.

�Mission: To facilitate water security through the planning, financing and implementation of bulk raw water infrastructure, in the most cost-effective manner that benefits water consumers


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Strategic Objectives

�Deliver on all mandates provided by the Minister, in accordance with specifications and within the agreed timelines and budget

�Facilitate social transformation and build sustainable communities by providing jobs and empowerment

�Operate the business projects and processes in a cost-effective manner, conscious of the imperatives of PFMA

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Strategic Objectives cont.

�Build the knowledge and capability of the organisation

to generate lessons for project

improvements, in pursuit of greater efficiencies in water delivery

�Ensure the continuous availability of high- calibre

human capital for delivering on

organisational

mission into the future, while remaining a value-adding agile entity.

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Products and Services

�Bulk raw water infrastructure

�Project design

�Project management

�Debt management

�Structuring and raising project finance

�Knowledge management

�Risk management

�Operation and maintenance

�Socio-economic transformation


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Strategic Transformation

� Preferential Procurement

� Emphasis on women owned enterprises and local enterprises

� Enterprise Development

� Two contractors being developed per project to enable them to construct multi-disciplinary projects

� Local Employment� Targets in contract to impose use of local employment

� Skills development

� Ensure

the

skills

set

of

the

local

population

is

enhanced99


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Main Activities

�Lesotho Highlands Water Project

�Berg Water Project

�Vaal

River Eastern Subsystem Augmentation Project

�Mooi-Mgeni

Transfer Scheme –

Phase 2

�Olifants

River Water Resource Development Project –

Phase 2

�Mokolo

Crocodile Water Augmentation Project –

Phase 1

�Komati

Water Scheme Augmentation Project


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Sector Challenges

�Institutional capacity constraints at both the national and municipal levels

�Uncertainty over Institutional Reform and Realignment process

�Weakness in the economic pricing of water, and in collecting water revenue

�Growth in water demand across competing sectors

�Long implementation lead-times in bringing new bulk infrastructure on-stream;

�High infrastructure backlog in water services


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Directives


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Vaal River Eastern Sub-system Augmentation Project (VRESAP)


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Vaal River Eastern Sub-system Augmentation Project

� VRESAP provides water to two key strategic industries:

� Sasol

in Secunda

� Eskom

Power Stations in Mpumalanga Province

� 131 km. 1.9 m dia. pipeline and associated pumpstations

Funding

� Borrowing limit: There is potential of a cash flow problem to complete the outstanding work prior to finalising

the claims against the service providers

� Final costs expected within the approved capital budget of R2.7 bn

Status

� Water delivery commenced in June 2009

Th

P

t

Ab

t

ti

W

k

i

t

H

d

f

O

ti


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Mooi-Mgeni Transfer Scheme: Phase 2 (MMTS-2)


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Mooi-Mgeni Transfer Scheme: Phase 2

� Augment the Mooi-Mgeni

system in KZN for water supply via Umgeni

Water to eThekwini, uMgungundlovu

and Msunduzi

Municipalities –

KZN economic hub

� Project comprises a dam in the Mooi

River and the upgrade of the water conveyance system through a new pump station and 2nd pipeline

Funding

� Project budget estimated at R1.7 bn

� The cumulative expenditure to-date is at R346 million

Status

� . The planned impoundment date: October 2012

Challenges

� The

resettlement

of

people

living

within

the

dam

basin

may

affect


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Komati Water Supply Augmentation Project (KWASAP)

Matla Power

Station


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Komati Water Scheme Augmentation Project

� Augment the Komati

System from the Vaal

Eastern Sub-System with 57 million m³

pa to supply water to Eskom’s

Duvha

and Matla

power stations and later the new Kusile

Power Station all in Mpumalanga Province

� Infrastructure includes a pump station next to Rietfontein

weir and 68 km of pipeline

Funding

� The KWSAP project budget is R 1 736 million and the cumulative expenditure to-date is at R463 million.

� The project is being implemented within budget

Status:

� Water delivery by October 2012


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Olifants River Water Resources Development Project: Phase 2 (ORWRDP)

De Hoop Dam


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Olifants River Water Resources Development Project: Phase 2

� Main beneficiaries

� social needs (Government agenda to provide basic water services by 2014)

� water requirements for further mining developments.

Funding:

� The Medium Term Expenditure Framework has confirmed an amount of R2.3bn for the project. The cumulative expenditure to-

date is at R181 million.

� For the remaining project components, the implementation plan will depend on the availability of funding (both on and off budget)

Status2020


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Mokolo-Crocodile Water Augmentation Project (MCWAP)


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Mokolo-Crocodile Water Augmentation Project Phase 1

Main beneficiaries

� Eskom’s

Medupi

Power Station, Exxaro, Lephalale

Local Municipality

� 46km pipeline and pump station & acquire existing infrastructure

–

transfer water from Mokolo

Dam 40 million m3/a

Funding

� The MCWAP-1 project budget is R 2 139 million and the cumulative expenditure to-date is at R 361 million.

� The project is being implemented within budget.

Status

� Environmental authorisation

obtained

� Construction activities for MCWAP-1 have just commenced

� Water Delivery is expected in June 20132222


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Acid Mine Drainage Works-Phase 1 (AMD)

� Acid Mine drainage will cause the Vaal

River System to go into deficit in 2014/15 if the salt load is not removed

� Directive is to implement the short term interventions in the 3 basins to:

� Prevent the Environmental Critical Level being breached and

� Serve as the first phase of the long-term solution which will ensure the salt load is removed from the system

� Directives received on the disposal of sludge and the discharge of treated AMD into the environment.

Funding


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Acid Mine Drainage Works-Phase 1 (AMD)

Status

�The immediate solution (the rehabilitation of the Rand Uranium Plant), to prevent decant a far as possible and assist in the drawdown to environmental critical level is currently under construction

�The tender for the short term intervention is currently under evaluation

Challenges

� Access to mining land and infrastructure with resulting implications on liabilities


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Metsi Bophelo Borehole Project

� TCTA is currently implementing the MBBP in six provinces namely:

� Eastern Cape; Free State; Limpopo; Mpumalanga; North West; and KwaZulu

Natal.

� The province of KwaZulu

Natal was included in the programme

in September 2011.

� The total project budget is R36.0million, with KwaZulu

Natal being allocated R6.0 million.


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Expanded Role


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New Advisory Services

� TCTA increasingly uses its skills to provide advisory services to DWA, small water boards and local municipalities. (Examples of work to date):

� New contract between Bloemwater

and Mangaung

Local Municipality

� Water Resource Augmentation Options for Mbombela

Local Municipality

� Tariff modelling

for the Rehabilitation/replacement of the Vaal

Gamagara

Scheme

� Submitted a Proposal to DWA: TCTA response to the National Desalination Strategy.

� Approached by the Sisonke

District Municipality for assistance in arranging funding for the proposed Bulwer-

Donnybrook Water Supply Project. The matter is with th

DG


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Budgets 2012/13

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Budget Overview 2012/13�The approved Budget has been based on

the following strategic imperatives:

ØIncreased activity on projects, as well as mandates received during the year (i.e. AMD);

ØNew projects anticipated.

ØIncreased capital expenditure and administrative costs, whilst headcount growth was limited, with only key roles being 2929


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At a glance

Budget Components Budget 2012/13

R’

Million

Capital Expenditure 3 644

Income (3 869)

Directly Controllable Expenditure 264

Indirectly Controllable Expenditure 853

Finance Costs 2 543

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Ø

The budget for 2012/13 was prepared based on the Long Term Cost Plans, Charter and expected timeline of the projects taking into

account current project delays.

Ø

BWP and VRESAP includes finalization of claims

Budget Highlights 2012/13 Capital Expenditure

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Budget Highlights 2012/13 Water income

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Ø

Water Income in LHWP budgeted in accordance with the agreement reached at the Annual Water Users Forum Tariff Review.

Ø

VRESAP income based on the Raw Water Supply Agreement entered into between TCTA, Sasol

and Eskom.

Ø

BWP revenue based on the Addendum to Raw Water Supply Agreement entered into between TCTA and City of Cape Town.

Ø

KWSAP

and

MMTS2

are

expected

to

commence

with

water

delivery

in

October

2012

and3333

Budget Highlights 2012/13 Water Income


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Budget Highlights 2012/13 Running Expenditure

3434

Ø

Stable increase in Running Expenditure made up of Directly Controllable Expenditure (administrative & operating expenses) and Indirectly Controllable Expenditure (Royalties to the Government of Lesotho; amortisation

of the enduring benefit; and Operating Costs of the LHWC and LHDA.


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Budget Highlights 2012/13 Financing Costs

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Ø

Increased funding requirement as project activity increasesØ

Higher inflation rate forecasts impacting on the CPI amortisation

for WS05. Inflation forecast from BER

indicates increase of 5.4%Ø

Expected loss on switch auctions necessary to increase tenure

of

bonds

(switch

WS04

into

WSP5)

Budget Highlights 2012/13 Financing Costs

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� Click to edit the outline text format

� Second Outline Level

− Third Outline Level

� Fourth Outline Level− Fifth

Outline Level

− Sixth Outline Level

Budget 2012/13 In SummaryNet Surplus of R198.72m

Ø

R267.70m higher than 2011/12 approved budget

Ø

Driven by R427m higher water sales as MMTS2 and KWSAP start earning income;

Ø

Partially offset by significant increases in royalties, directly

controllable expenditure and marginally higher finance costs.

Capital Expenditure – R3 644.34m

Ø

R1.1bn higher than 2011/12 Budget as project activity increases

Funding Requirement – R3 465.76m

Ø

Marginally lower funding requirement as projects like KWSAP and MCWAP approach the end of construction. Most of capital expenditure i f

d d th

h th fi

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Medium Term Forecast - At a glance

Budget 2011/12

Budget 2012/13

Budget 2013/14

Budget 2014/15

Capital Expenditure 2 464 3 644 3 371 2 990 Income ( 3 443) ( 3 869) ( 4 571) 5 115 Funding Costs 2 491 2 542 2 622 2 560 Running Expenditure 1 024 1 128 1 195 1 268

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Ø

Revenue for the medium term has been budgeted for based on the income agreements.

Ø

Water sales for 2012/13 include the commencement of billing for KWSAP and MMTS2

Ø

Water sales on MCWAP commences in 2013/14

Medium Term Forecast - Highlights

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Ø

Capital expenditure drops as projects are completed (KWSAP, MMTS2 and ORWRDP) as per the Long Term Cost Plan

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Ø

The main factors driving the increased finance charges are the higher interest rates and larger volume of funding.

Ø

The medium term is expected to peak at R2.6 billion, and falls in 2014/15, as the newer projects are generally socially funded and do not increase

the finance charges.

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Directly Controllable Expenditure

Ø

The increase in this expenditure in 2012/13 is based on business drivers, while the outer years are generally increased by National Treasury inflation guideline of 6.5%

Indirectly Controllable Expenditure

Ø

Royalties increase due to the forecasted increase in electricity

tariffs

for

the

medium

term

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Net SurplusØ

Increases from 2012/13 to 2014/15 due to significant increase in water sales as KWSAP, MMTS2 and MCWAP begin to earn water income;

Ø

This is only partially offset by increases in royalties and directly controllable expenses

Capital Expenditure ØDecreases from 2012/13 to 2014/15, as projects near completion based on the Long Term Cost Plan.

Funding RequirementØDeclines as projected Capital Expenditure declines, and the mix of funding sources swings towards socially funded projects.

Directly Controllable ExpenditureØ Increase on 2012/13 are inflationary.

Medium Term Forecast: 2012/13 -2013/14 Summary

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Financial Highlights 2012/13

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Independent Auditors OpinionAchieved Unqualified Audit Report.

Ø

Audit Opinion: “the financial statements present fairly, in all material respects, the financial position of the Trans-Caledon

Tunnel Authority as at 31 March 2011, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Public Finance Management Act of South Africa.”

Ø

Report on other legal and regulatory requirements: “there were no material deficiencies identified during our audit that resulted in a modification of the auditors’

opinion on the financial statements and/or material findings on predetermined objectives and/or compliance with laws and regulations.”

Ø

Compliance with laws and regulations: “there

were

no

material

findings4646


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Summary of Salient Elements

Key elements in the financial statements for the year ended 31 March 2011 include:

ØThe inclusion of the 2 new mandates received during the year (MCWAP and Borehole Project).

ØThe early adoption of standards amendments to IFRS, including:

Ø IAS 1 Presentation of financial statements (amended, effective 1 January 2011)

Ø IAS

24

Related

party

disclosures

(amended,4747


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Summary of Salient Elements

4848

ØPrior period adjustments made to the

2010 financial year relate primarily to advance payments from DWA.

ØSubsequent events include disclosure

on the directive for AMD issued to TCTA on 6 April 2011.


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Prior Period Adjustments

Prior period adjustments made to the 2010 financial year relate primarily to advance payments from DWA. Following directives received by TCTA on MCWAP, KWSAP and ORWRDP, TCTA was required to commence with work on these projects without having secured funding on the projects.

Ø

A Memorandum of Understanding was entered into between TCTA and DWA to establish a contractual agreement between DWA and TCTA which would enable DWA to pay TCTA an advance in order for TCTA to act on the directive received from the Minister.

Ø

In the case of ORWRDP and MCWAP, although invoices were issued to DWA, funds had not been received from DWA at year-end and in error; these invoices were not recorded in the general ledger. The prior period adjustment corrects this as it

records both the Working Capital Advance (liability) and the debtor (being the invoice due by DWA).

With regards to the KWSAP Memorandum of Understanding, Eskom

was to advance funds to TCTA to meet the funding requirement regarding pre-directive engineering costs.

Ø

The invoices issued to Eskom

had been paid and recorded as Revenue at year end in 2010. In 2011 when the MOU was actually signed, the terms of the agreement were properly assessed, which revealed that this in fact was an advance (as opposed to revenue) which TCTA has since paid

back

to

Eskom

in

20114949


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Statement of comprehensive income

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Aggregated Statement of Financial Position

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Aggregated Statement of Financial Position

5252

2011 2010 CommentsEquities & Liabilities

Reserves & Deficit (3 906) (3 930)

Non Current Liabilities

Long Term Financial Market Liabilities

23 620 22 307 •

R500m increase in nominal value of bonds switched.

•

R172m CPI increase•

R235m increase from new WSP bonds issued

•

R98m repayment of loans

Other 335 342

Current Liabilities

Trade & Other Payables 1 197 992 Higher levels of borrowing in 2011 have resulted in higher accrued interest at 31 March 2011 compared to 2010

Short Term Financial Market Liabilities

2 332 4 778 This is mainly due to the

redemption of WS03 (R 2 585 million) in September 2010.

Other 126 183

Total Equity & Liabilities 23 704 24 672


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� The income agreements allow for a CPI adjusted increase on an annual basis as well as automatic triggers.

� Debt will be repaid over the planned repayment period and the organization is a going concern.

� The External Auditors have confirmed that TCTA is a going concern.

� 2010/11 Financial year� Operating surplus of R2.3 billion� Surplus of R44 million (after funding costs)

53

TCTA is a Going Concern

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Thank youTCTA

Telephone: (012) 683 1200Website: http://www.tcta.co.za

Questions

Documents

Presentation of the TCTA Strategy for 2012 to 2013pmg-assets.s3-website-eu-west-1.amazonaws.com/docs/...The Medium Term Expenditure Framework has confirmed an amount of R2.3bn for